Oil Prices To Hit US$66 Per Barrel In 2Q 2026 Before Year-end Recovery -- BMI

KUALA LUMPUR, March 25 (Bernama) -- Oil prices are expected to fall to US$66 per barrel in the second quarter of 2026 (2Q 2026), following a stronger performance of US$78 per barrel in the first quarter (1Q 2026), before gradually recovering towards year-end, according to BMI.

The research unit of Fitch Solutions said its forecast remains unchanged, with Brent crude projected at an annual average of US$70 per barrel for 2026.

The outlook assumes a relatively rapid post-conflict recovery, with limited lasting damage to critical upstream production and export infrastructure, as well as a two-to-four week normalisation of flows through the Strait of Hormuz.

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“However, our country risk team notes rising risk of a longer-duration war, assigning a 35 per cent probability to their ‘extend-to-end’ scenario (lasting up to eight weeks) and a 25 per cent probability to their ‘extend-to-escalate’ scenario (lasting multiple months).

“If we move into the ‘extend-to-end’ scenario, we will raise our annual average forecast for Brent into a range of US$75-82 per barrel for 2026,” it said in a statement.

BMI said it does not believe the disconnect between paper and physical markets can be sustained and expects greater contagion to Brent prices under the ‘extend-to-end’ scenario.

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It also sees global market deficits ranging from 7.5 million to 15.0 million barrels per day.

“Market participants and policymakers have been pulling on a lot of levers to offset the losses from the Gulf, including pipeline rerouting away from the strait, strategic inventory releases, a drawdown of oil on water and commercial stocks onland, a temporary waiver of certain oil-related sanctions on Russia (and, to lesser effect, Iran), and an easing of some domestic fuel regulations,” it added.

However, it said these buffers are rapidly being depleted, and there will be far fewer levers to pull in the next four weeks than in the previous four.

“Moreover, as the war continues, the threats to residual flows through the Strait of Hormuz and to the volumes transiting the Red Sea will rise, as will the risk of wider-spread damage to critical production and export infrastructure in the region, which could slow the post-conflict recovery,” it added.

-- BERNAMA